Proposed Tax Credit Unlikely to Plug Gaps Left by Budget Cuts

June 28, 1995

A tax cut proposal designed to help charities plug the gaps created by massive federal budget cuts is winning little enthusiasm among officials of Jewish social service agencies.

The measure, known as “The Choice in Welfare Tax Credit Bill,” would give taxpayers a dollar-for-dollar tax credit up to $100 for individuals and $200 for joint filers when they donate to a qualified charity.

It is being spearheaded by Sen. Rick Santorum (R-Pa.) and Reps. Jim Kolbe (R- Ariz.) and Joe Knollenberg (R-Mich.).

Officials of Jewish charities welcomed the legislation but said it was not likely to ease the burden government funding cuts would place on private charities.

“If the federal government can suggest ways to increase contributions, what would be fine, but I don’t think taking government money away and replacing it with charitable donations will work,” said William Rapfogel, executive director of the Metropolitan New York Coordinating Council on Jewish Poverty.

A network of 25 local agencies, Met Council assists the poor in housing, entitlements and others aid.

Although the tax credit could increase donations, it does not specify what charities the money goes to, Rapfogel said. Nor does it take into account the difference in cost of living between the states.

“It may increase donations, but there’s no needs assessment here,” he said. “There’s no suggestion that this will target donations to particular areas,” which may need it most.

Also, only charities that work with those who make 150 percent or less of the poverty line and spend 30 percent or less of their revenue on administrative costs will qualify as tax credits, possibly excluding some Jewish groups, said Rapfogel.

Another Jewish official expressing skepticism is Martin Wenick, executive vice president of the Hebrew Immigrant Aid Society, which assists Jewish refugees and immigrants.

“I’m not convinced that this in and of itself is sufficient to stimulate large sums of private dollars that would replace the loss of federal funds,” he said. “I think this would be a mere dot on the horizon in terms of assistance” to charities.

Although encouraging people to donate to charities is positive, Wenick said he did not think the bill would have a major impact on fund raising.

A tax credit is money subtracted from what a taxpayer owes the government, while a tax deduction comes out of taxpayer’s adjusted income. Only taxpayers who owe the government money will be eligible for the tax credit.